NIC MAP Vision released its latest Skilled Nursing Monthly Report on June 29, 2023. The report includes key monthly data points from January 2012 through April 2023.

Here are some key takeaways from the report.

Occupancy

Skilled nursing occupancy increased in April after declining in March. It increased 9 basis points from March to end the month at 81.0%. However, occupancy has been down slightly since the beginning of the year (2023) in January. There was positive momentum in occupancy throughout 2022 and it is up 632 basis points since the low point (74.7%) reached in January 2021. Although occupancy was relatively flat from May 2022 through September 2022, it did increase 277 basis points from January 2022 to January 2023. The staffing crisis in the sector is still a significant burden on skilled nursing operators, especially as the acuity level of patients has increased along with the demand for nurses. As staffing, wage growth, and general inflation pressures persist, operations for many operators will be under pressure but the long-term demand for skilled nursing services is expected to grow over time.

Medicaid

Medicaid revenue mix increased, ending April at 50.4%. However, it is down 127 basis points from one year ago when it was 51.6% in April 2022. One element of the Medicaid revenue share of a property’s revenue is revenue per patient day (RPPD) and that was up slightly from March. It is up 3.0% since last year in April 2022 and is now at $270. Medicaid reimbursement has increased more than usual as many states embraced measures to increase reimbursement related to the number of COVID-19 cases throughout the pandemic, but many states have continued to increase reimbursement. Medicaid has increased 6.3% since February 2020. On the other hand, covering the cost of care for Medicaid patients is still a major concern as reimbursement does not cover the cost of care in many states. In addition, nursing home wage growth is elevated along with overall inflation, and staffing shortages are still a significant challenge in many areas of the country.

Medicare

Medicare revenue per patient day (RPPD) decreased slightly from March to end April at $587. This was a 0.69% decrease from its recent high of $591 in December 2022, which was its highest level since June 2020 when the federal government began implementing many initiatives to aid operators of properties for cases of COVID-19, including increases in Medicare fee-for-service reimbursements to help care for COVID-19 positive patients requiring additional care. Medicare RPPD is up 1.77% from one year ago in April 2022 and some of that increase can be attributed to the fiscal increase for 2022-2023. Meanwhile, Medicare revenue mix trended down in the month of April, decreasing 41 basis points from 22.0% to end the month at 21.6%. It is up 102 basis points compared to one year ago in April 2022. However, it is down 306 basis points from February 2022 which was when the country had an elevated number of COVID-19 cases, and the data suggests there was a significant uptick in the utilization of the 3-Day Rule waiver as COVID-19 cases increased last year. The 3-Day Rule waiver was implemented by Centers for Medicare and Medicaid Services (CMS) to eliminate the need to transfer positive COVID-19 patients back to the hospital to qualify for a Medicare paid skilled nursing stay, hence increasing the Medicare census at properties. As the cases decline, the Medicare revenue share declines, all else equal.

Managed Care

Managed Medicare revenue mix decreased 9 basis points from March to end April at 11.2%. This is up 202 basis points from the pandemic low set in May 2020 of 9.2%, which was a time when elective surgeries were suspended and created less referrals from hospital to skilled nursing properties. Meanwhile, Managed Medicare revenue per patient day (RPPD) decreased from $482 to $481 in April. Compared to its year-earlier value of $484, it is down 0.7% and it is down $121 (20.1%) from January 2012. It continues to create pressure on operators’ revenue as managed Medicare enrollment continues to expand its reach and coverage around the country. However, some operators see an opportunity to capture patient volume with the growth of managed care. The persistent decline in managed Medicare revenue per patient day continues to result in an expanded reimbursement differential between Medicare fee-for-service and managed Medicare. Medicare fee-for-service RPPD ended April 2023 at $587, representing a $107 difference. For context, the differential one year ago was $93 and two years ago it was $85.

Get more trends from the latest data by downloading the Skilled Nursing Monthly Report. There is no charge for this report. 

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form on our website. NIC and NIC MAP Vision maintain strict confidentiality of all data received.

The following analysis examines occupancy and year-over-year changes in inventory, and same-store asking rent growth—by care segment—within entrance fee CCRCs and rental CCRCs in the 99 combined NIC MAP Primary and Secondary Markets. The analysis also explores the recovery of regional occupancy rates by payment type (entrance fee CCRCs vs. rental CCRCs) as well as the distribution of occupancy rates by payment type across all care segments during the first quarter of 2023.

NIC MAP^®, powered by NIC MAP Vision, collects primary data on occupancy, asking rents, demand, inventory, and construction for more than 16,100 independent living, assisted living, memory care, skilled nursing, and continuing care retirement communities (CCRCs—also referred to as life plan communities) across 140 U.S. metropolitan markets. The dataset includes about 1,160 not-for-profit and for-profit entrance fee and rental CCRCs in these 140 combined markets, including 1,078 in the 99 combined Primary and Secondary Markets.

Occupancy Trends – Entrance Fee CCRCs Lead the Way and Surge Ahead of Competition

Entrance fee CCRCs have consistently outperformed rental CCRCs and non-CCRCs since NIC MAP Vision began reporting data in 2005. In the 99 NIC MAP Primary and Secondary markets, the occupancy rate for entrance fee CCRCs stood at 89.3% in the first quarter 2023, 4.9 percentage points (pps) higher than rental CCRCs (84.4%) and 7.7pps higher than non-CCRCs (81.6%).

Notably, the difference in occupancy rates between entrance fee CCRCs and rental CCRCs/non-CCRCs has been increasing since at least 2015 as the exhibit below shows, and this gap was amplified during the height of the pandemic. In fact, the occupancy differences between entrance fee CCRCs and non-CCRCs reached double digits in 2020 and 2021, with entrance fee CCRCs experiencing a relatively smaller decline in occupancy compared to non-CCRCs and rental CCRCs.

Generally, the success equation for CCRCs includes the profiles and characteristics of both residents and staff as principal components.

Residents of CCRCs are typically “life planners” and have set upon this life choice carefully and with considerable savings. The unique model of care in CCRCs often attracts younger residents with fewer health concerns and allows them to move through the continuum of care more seamlessly as acuity increases. Residents of CCRCs tend to have fewer serious health conditions upon move in and have passed medical screenings prior to admission. This likely leads to longer length of stay and greater overall retention.

From a workforce perspective, CCRCs often address staffing shortages by leveraging their ability to employ/assign workers across various levels of care, in order to fill staffing gaps. This staffing strategy can lead to improved resident experience and consistent quality of care, while also promoting a sense of community for both residents and staff.

Additionally, entrance fee CCRCs tend to offer financial structure and stability to residents, and residents of entrance fee CCRCs tend to have more financial resources, mainly due to the screening of financial conditions prior to admission. This can also lead to greater resident retention.

Further, operators of entrance fee CCRCs often have greater access to capital compared to rental CCRCs due to substantial upfront revenue generated from entrance fees, often financed through the sale of residents’ homes, and typically have access to different financing options. 

Recovery of Regional Occupancy Rates by Payment Type – Entrance Fee CCRCs vs. Rental CCRCs

In the first quarter of 2023, entrance fee CCRCs maintained higher occupancy rates than rental CCRCs across all regions. The largest differences in occupancy between entrance fee and rental were reported for the West North Central region, where entrance fee CCRC occupancy was 7.2 percentage points higher than rental, followed by the Mountain (5.6 percentage points), and the Southeast (5.4 percentage points).

Strong Occupancy Rates in Mid-Atlantic, Northeast, and Pacific. The Mid-Atlantic, Northeast, and Pacific regions had the strongest occupancy rates for both entrance fee and rental CCRCs in the first quarter of 2023. The occupancy rates within these regions with respect to payment type were above the average occupancy rate for entrance fee CCRCs (89.3%) and rental CCRCs (84.4%) in the combined 99 NIC MAP Primary and Secondary Markets.

Mid-Atlantic and Southwest Regions Closest to Recovery. For entrance fee CCRCs, the Southwest and Mid-Atlantic regions are the closest to fully recovering and returning to the occupancy levels of the first quarter 2020. The Southwest region has reached 86.0% occupancy, while the Mid-Atlantic regions is at 91.1%. Both regions are within 1.4pps and 2.2pps, respectively, of reaching pre-pandemic first quarter 2020 levels. As for rental CCRCs, the Southwest region (84.3%) has fully recovered and returned to the occupancy level of the first quarter 2020.

1Q 2023 Market Fundamentals by Care Segment – Entrance Fee CCRCs vs. Rental CCRCs

The exhibit below illustrates the relative market performance of entrance fee CCRCs compared with rental CCRCs by care segment in the first quarter of 2023 and includes year-over-year changes in occupancy, inventory, and asking rent growth.

Occupancy. Overall, the occupancy rate for entrance fee CCRCs continued to outpace that of rental CCRCs across all care segments. The difference in the first quarter 2023 occupancy rates between entrance fee CCRCs and rental CCRCs was largest for the memory care segment (4.8pps) and the independent living segment (4.2pps), and smallest for the nursing care segment (2.0pps).

The entrance fee CCRC independent living care segment had the highest occupancy (91.1%) in the first quarter of 2023, followed by entrance fee CCRC assisted living and memory care segments (88.0% and 87.7%, respectively).

In terms of occupancy improvements from one year ago, the largest occupancy gains for both entrance fee CCRCs and rental CCRCs were seen across nursing care segments (4.1pps and 3.6pps, respectively) -partly due to supply dynamics (negative inventory growth), while the smallest gains were seen across independent living segments (0.9pps and 1.8pps, respectively).

Asking Rent. The monthly average asking rent for entrance fee CCRCs across all care segments remained higher than rental CCRCs. The highest year-over-year asking rent growth for entrance fee CCRCs was noted in the assisted living segment (4.4% to $7,106). For rental CCRCs, the largest year-over-year asking rent growth was noted in the independent living segment (5.0% to $3,450). Overall, year-over-year asking rent growth across all care segments and payment types was around 4% in the first quarter 2023.

Note, these figures are for asking rates and do not consider any discounting that may be occurring.

Inventory. From year-earlier levels, nursing care inventory for both entrance fee and rental CCRCs experienced the largest declines (negative 3.4% and 2.7%, respectively). The highest year-over-year inventory growth was reported for the entrance fee CCRC independent living segments (0.5%) and rental CCRC memory care segments (0.3%).

Negative inventory growth can occur when units/beds are temporarily or permanently taken offline or converted to another care segment, outweighing added inventory.

1Q 2023 Occupancy Distribution by Care Segment – Entrance Fee CCRCs vs. Rental CCRCs

Moving beyond the analysis of average occupancy rates, the exhibit below explores the distribution of occupancy rates across entrance fee and rental CCRC care segments and provides deeper insight into the occupancy patterns.

Interestingly, there is a greater prevalence of entrance fee and rental CCRC care segments within the higher occupancy rate ranges. As the exhibit below shows, the most notable share is observed in the >90% occupancy range, ranging from 36% in rental CCRC nursing care segments to 61% in entrance fee CCRC independent living segments. The 80-90% occupancy range follows, with shares ranging from 17% in rental CCRC memory care segments to 27% in entrance fee CCRC nursing care segments.

Entrance Fee CCRCs. The combination of the 80-90% occupancy range and >90% occupancy range shows that 86% of entrance fee independent living segments reported an occupancy rate above 80% in the first quarter of 2023. This represents the largest share across all care segments and payment types. Assisted living follows closely at 79%, while memory care stands at 74%, and nursing care stands at 68%.

For rental CCRCs, 68% of independent living segments reported an occupancy rate above 80%, followed by assisted living segments at 66%, and memory care and nursing care segments both at 60%.

While these positive figures are encouraging, there are still segments within both entrance fee and rental CCRCs that report relatively low occupancy rates. The largest shares of low occupancy were noted in rental CCRC memory care segments (15% below 50% occupancy, 4% within the 50-60% occupancy range, and 6% within the 60-70% occupancy range) and rental CCRC nursing care segments (12% below 50% occupancy, 4% within the 50-60% occupancy range, and 8% within the 60-70% occupancy range). It is worth mentioning that there are fewer entrance fee care segments within these relatively low occupancy cohorts.

In conclusion, the unprecedented challenges posed by the pandemic have had a profound impact on the senior housing and care industry. To ensure financial stability and sustainability as the sector navigates through recovery, it may be strategic to aim for a higher occupancy rate, even above pre-pandemic levels (this analysis showcased the higher occupancy ranges’ dominance across all care segments). This takes into account the need to mitigate the lingering effects of the pandemic, adapt to changing market dynamics, and address the rising costs of operations. Properties with an occupancy rate above 80%, which are depicted as the majority in this analysis, are likely better positioned to maintain a healthy bottom line and navigate the evolving market conditions.

Look for future blog posts from NIC to delve deep into the performance of CCRCs.  
Are you interested in learning more?  To learn more about NIC MAP Vision data, and about accessing the data featured in this article, schedule a meeting with a product expert today.

This article originally appeared in Ziegler’s Senior Living Finance Z-News. 

Despite constrained capital markets and a challenging operating environment, the senior housing sector could be looking at a window of opportunity far more attractive than it has been for some time. 

Occupancy is recovering. The supply of new properties has slowed in part because of a pullback by lenders. And the long-awaited big demographic wave of baby boomers is finally beginning to break. They’re reaching the age where some type of senior housing makes sense.  

“The stars are starting to align for opportunities looking forward,” said Rick Brace, director at AEW Capital Management.

Brace made the observation during a recent NIC Leadership Huddle, the third in a series of webinars led by NIC Chief Economist Beth Mace. They were joined by Mary Ludgin, senior managing director and head of global research at Heitman.  

“We are pleased to be able to talk with two highly regarded research directors,” said Mace, noting that they’ve experienced the ups and downs of the commercial real estate market. “They’re cycle-tested.”  

Before tackling the specifics of the senior housing segment, the researchers provided context on the macroeconomic climate, the broader commercial real estate sector, capital markets, and valuation trends.  

Expect the Economy to Slow 

An economic downturn seems likely, though when and how deep is hard to predict, the researchers said. 

The most recent consumer price index decelerated to 4%, the smallest 12-month increase since March 2021. Though the pace of inflation is headed in the right direction, Brace expects an economic downturn in part because of volatility in the capital markets.  

After 15 months of consecutive interest rate hikes, the Federal Reserve skipped in June on raising rates. But Ludgin thinks the Federal Reserve may have raised interest rates too fast. “The risk is a recession,” she said. 

If the economy is headed toward a recession, Ludgin noted that the commercial property markets are broadly in good shape. The big exception is the office market, beset with vacancy problems as many employees continue to work from home and companies shrink their office space footprints.  

Meanwhile, industrial markets are holding up fairly well and retail properties are beginning to stabilize. Apartments could be somewhat overbuilt, however.  

In 2022, valuations among the public REITs fell about 25%. Private market valuations have not declined that far but could be down 15% over the course of this correction period, according to the researchers.  

Context Counts 

How does this cycle compare to the 2007-2008 Global Financial Crisis (GFC), asked Mace. 

“There’s not a lot to compare,” said Ludgin. The GFC started as a housing downturn with wide geographic scope, followed by a banking meltdown. “We are not seeing something like that,” she said. 

Unlike the zero-interest rate policy (ZIRP) in the wake of the GFC, however, Brace pointed out that this time the cost of capital has been rising quickly. That gives borrowers less wiggle room with lenders. “It’s something to keep an eye on,” he said. 

Putting the latest economic chapter in perspective, Mace compared the pandemic to an earthquake, resulting in secondary aftershocks such as supply chain disruptions and demand spikes. That led to inflation, which the Federal Reserve stepped in to slow with a rapid series of rate hikes. “Now we’re living through the impact,” she said. 

Expectations for investment returns are lower in the near term. But looking ahead there will likely be opportunities for higher returns with potentially lower risks. 

 AEW is rolling out its fifth senior housing investment fund. The fund will initially be less focused on new development. “It’s a little too early,” said Brace. For now, opportunities will be explored in debt platforms, preferred equity, and rescue capital.   

Because of spikes in new construction during the last decade, Heitman had stepped away from equity investments in U.S. senior housing, preferring debt positions instead. But the firm recently made an equity investment in a portfolio that includes existing senior housing and some new development.  

Explaining the shift in strategy, Ludgin noted that a large portion of the existing stock of senior housing is 30-40 years old and becoming obsolete. “That creates an opportunity,” she said. 

Operators are Key 

Underwriting standards haven’t changed much, according to the researchers. Few deals are getting done, so guidelines are a little more conservative.  

“We’re looking for growth in net operating income,” said Brace. Also, concerns are mounting about the huge amount of debt coming due in the next few years. Mace estimated the total at $10-$12 billion. “Refinancing is a challenge,” she said.   

Turning to new investments, both researchers emphasized the importance of the operator in any decision.  

Heitman won’t enter deals with a questionable operator even if the deal looks good on paper. The operator needs a good track record and a clear idea of how to best manage the needs of seniors.  

AEW has had success working with smaller, mid-size operators, though the firm is open to talking to operators of all sizes.  

The webinar ended on an optimistic note. Despite some pricing resets and other challenges, the researchers expect the senior housing market to perform well in the coming years. “We’re well along in this recovery,” said Brace.  

To view the recording of this and other past NIC Leadership Huddle webinars, visit our website.  

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Registration is now open for the 2023 NIC Data & Analytics Conference, the first-of-its-kind forum to discuss best practices in property analysis, learn about key input metrics and collaborate with like-minded peers. The Conference will be held in Minneapolis, September 27-28. Register now! 

I have mixed emotions as I write this blog post announcing that I will be transitioning my role at NIC. After nine years of being on the staff as NIC’s Chief Economist and a comparable number of years being involved with NIC in various roles including being a member of the Board of Directors and the chair of the Research Committee, I will be stepping back to spend more time on other activities. That said, I am not entirely stepping back! I will now be a consultant and special advisor to NIC focused on monitoring and reporting changes in the economy and the capital markets that impact the senior housing and care investments and operations. 

Two Hands. As an economist, with two hands of course, on one hand I am excited about this change as it will provide me time to enjoy many other interests and passions. On the other hand, I can’t entirely walk away from the passion that has consumed me for nearly 20 years—helping to support those that directly and indirectly provide care and housing options to America’s older adults in the senior living industry.

I have truly loved my professional career, especially the many years devoted to the senior housing industry. I have watched senior housing grow into an acceptable institutional investable asset class, participated in improving the understanding of the sector—both its challenges and its opportunities, and assisted in creating and growing the first market fundamentals database—NIC MAP^®—–that started in 2005.

Importantly, I have helped shine a spotlight on the need to provide housing and care options for older adults and highlighted this need for the largely underserved middle-income cohort. I was privileged to co-author “The Forgotten Middle: Many Middle-Income Seniors Will Have Insufficient Resources For Housing and Health Care,” published by the leading health policy journal Health Affairs. This groundbreaking research defined the “middle market” for senior housing and care and has been the subject of dozens of news stories, opinion pieces, and panel discussions.

This is a topic that will certainly not go away, and NIC will continue to focus on this critical matter for years to come as evidenced by its importance in NIC’s recently adopted 5-year Strategic Plan. As I write this blog, my colleagues are putting together case studies that carefully describe businesses that have had successful implementations of projects that serve the Forgotten Middle. In addition, NIC is funding important research initiatives with the Milken Institute and the Joint Center for Housing at Harvard University.

Thank you, and you, and you. I have also had the honor to grow and lead NIC’s well-regarded and respected Research & Analytics Group. We have generated some amazing reports, commentaries, and analyses over many years. The NIC website, www.nic.org, provides access to many reports including white papers on the emerging active adult property type, labor market conditions, projections of future supply and demand, and the seminal NIC Investment Guide. Our content is often picked up by the media, after it has initially been released as a blog on NIC Notes or as an article in the NIC Insider Newsletter. Over the years within the Insider, we have interviewed industry leaders and icons, done deep dives on specific geographies, assessed occupancy conditions, dug into innovative ideas to address labor shortages, and featured best-in-class articles from members of NIC’s Futures Leaders Council (FLC).

A big shout out to all the Research & Analytics team including Ryan Brooks, Caroline Clapp, Bill Kauffman, Omar Zahraoui, and of course my partner in much of this work, Chuck Harry, NIC’s Chief Operating Officer. And a big welcome to Yitao Luo and Karan Shah who have just joined the team and promise to be significant contributors to deep and important data-driven insights. And thanks to Lana Peck and Anne Standish who contributed much to the NIC Research & Analytics team in their many years of service at NIC. 

And a shout out to NIC’s awesome marketing and communications team led by Laurie Tomko, who works alongside Kathy Belleville, Michael Le, Darren Jasieniecki, Leigh Anna Geraghty, and Rebeca Ahumada. And a special shout out to Cathy MacKenzie who has always supported me with great enthusiasm and professional excellence. And huge appreciation to other members of the corporate support staff including Becky Bowen, IT engineer extraordinaire, Rose Phillips, Cheryl Hills, Carla Burt and of course Priscilla Hammett, who directs NIC’s Finance and Administration team.

Over the years, I have also had the honor of presenting at many of NIC’s conferences, hosting the NIC Chats podcast, and participating in industry and other Board of Directors’ meetings. NIC’s conferences are the best, as anyone reading this blog can attest to. If you have not attended one, don’t miss the next one taking place October 23rd to 25th in Chicago. It’s also very exciting that NIC will be hosting its inaugural Data & Analytics conference on September 27th and 28th in Minneapolis. Kudos to Jill Blimline, Ashley Hurst, Jessica Pearce, Serena Lipton, Staci Goff, Jamie Bruchey, Katie Anderson, and other NIC staff team members for making these events shine with incredible execution and rich content. And I would be negligent not to mention Debbie Cohen who worked for many years supporting extraordinary content and its delivery. And, of course, thank you to the many, many volunteers that support, help create and provide robust subject matter for the conferences as well.

And lastly, thank you to the NIC Board and the NIC leadership team led by Ray Braun and formerly Brian Jurutka for providing me the opportunity to work alongside you to help co-create an awesome, effective and meaningful organization in which to work. The NIC Board deserves herculean recognition in its steadfast, deliberate, passionate guidance. Currently led by Susan Barlow, recently led by Kurt Read, preceded by Brad Razook, John Moore, Randy Richardson, Kevin McMeen, Kathy Sweeney, and Ray Braun (yes, he was formerly the Chair of the NIC Board!), it is a mighty leadership team indeed. The mission of NIC is a special one, and I feel honored to have participated in its execution.

I have had the privilege of meeting so many industry leaders and have learned much and am in awe of the work you and your organizations do for older adults. Volunteer leadership is what makes NIC able to execute its mission—thank you! It is truly an industry where you can do well by doing good. 

And a special thanks to Bob Kramer, co-founder of NIC, who hired me and provided me with a vision into which to grow, a platform from which to work, and the enthusiasm and excitement that matches no other person that I have ever known.

And lastly, thank all of you reading this blog and all the many stakeholders associated with the senior housing industry broadly and NIC more specifically. Your passion to serve America’s older adults is a privilege to witness. This refers to all of you, be it the finance side of the shop, the operations, the care provision, and the well-wishers too.

Looking Ahead. Today is an exciting time for the industry with the baby boomers (finally) almost at our doorstep! Hence, I’m not entirely going away! 

However, today’s turbulent capital market conditions are causing disruption in our industry. Higher debt costs have come at a difficult time for many borrowers, especially those senior housing operators who are still fighting to recover to pre-pandemic levels of occupancy—one third of operators in the NIC MAP Primary Markets have occupancy levels below 80%. Cash flows have already been hampered by rising costs associated with limited labor pools (such as average hourly earnings for assisted living employees were 6% higher than year-earlier levels in March 2023, although this does mark a significant slowdown from the 10% pace seen one-year earlier), rising food and energy costs, escalating insurance rates, and revenue growth that still has room for further recovery.

Transactions Stall. There are other consequences to the changing interest environment including the impact higher rates are having on transaction volumes, cap rates, and property valuations. The transactions market today is highly illiquid, with few transactions occurring and price transparency opaque at best. In the first quarter, transactions volumes for the senior housing and care sector fell below $800 million according to preliminary data from NIC MAP Vision, a first-quarter pace well below that of any recent prior year. Bid-ask spreads remain wide as the reality of today’s markets becomes fully understood. It’s a bit of a waiting game as sellers remain on the sidelines to see where pricing stands and as buyers wait on the sidelines because they do not want to take a negative valuation adjustment once they purchase an asset.

Property values are falling, whether measured by lower prices per unit or by higher cap rates. Private sector appreciation returns are slipping, and publicly traded REIT values, which are often a preview into the private sector, fell sharply in 2022 and from year-earlier levels in the first quarter of 2023.

When Will It All Change? The question is when will markets stabilize and what must happen for this to occur. And this is the area that I will focus on in my new role as special advisor.

I will continue to do what I have done for NIC since I was hired. I will monitor the economy and market conditions and try to the best of my ability to get ahead of it, understand it, and inform NIC’s stakeholders. It’s my passion. I love tracking current trends, listening to others, and processing information in a way that makes sense of the many data points and views that exist. My job will continue to be keeping you all informed about how today’s market conditions affect our sector and your businesses. I will strive to highlight emerging trends and opportunities.

And I will continue to work with the powerful NIC team and look forward to additional collaborations with them and the amazing base of volunteers that work side by side with the small but mighty NIC staff. While there may be near-term capital market challenges, the long-term view for the senior housing and care sector is compelling and bright, and the services provided by the sector are very much needed and in demand.

And with that, I welcome your comments and thoughts. Finally, let’s stay in touch! 

Most humbly,

Beth Mace, Consultant and Special Advisor, NIC 

Reach me on email or on LinkedIn.

According to estimates derived from an analysis released by NIC Analytics in 2022, approximately  one in nine Americans aged 65 and older, totaling 6.5 million individuals, are affected by Alzheimer’s or other dementias. The analysis further indicated that the prevalence increased with age, with higher ratios observed in older age cohorts. By projecting the findings to 2030, NIC Analytics estimated that around 8.2 million Americans will be living with Alzheimer’s or other forms of dementia just seven years from now. These estimates highlight the importance of providing tailored and innovative care and support to meet the growing demand for specialized memory care services.

In this article, we explore the memory care sector – a senior housing segment that is specifically designed for residents with Alzheimer’s or other forms of dementia – in terms of its market fundamentals within the combined 99 NIC MAP® Primary and Secondary Markets. The article provides an overview of supply and demand dynamics, occupancy rates across properties and different types of campuses, compared with the broader senior housing property segment types (i.e., independent living and assisted living segments). Note that memory care in this article uses the segment type designation from NIC MAP Vision, meaning that the data used in this analysis are memory care units that can be located at any type of property.

Fundamentals of the Memory Care Segment − 99 NIC MAP Primary & Secondary Markets

Supply Dynamics. Historically, memory care segments have reported higher rates of inventory growth compared with independent living and assisted living segments. Notably, over the period from first quarter of 2015 to first quarter of 2020, the five-year period prior to the pandemic, inventory for memory care segments in the 99 Primary and Secondary Markets increased by over 46%, averaging 1.9% growth on a quarterly basis. As of the first quarter of 2020, roughly one in three existing memory care units had been developed over the span of five years. By comparison and over the same five-year period, inventory for independent living and assisted living segments grew by 10.9% and 18.0%, respectively.

Although at a slightly slower pace, supply dynamics for memory care segments since the first quarter of 2020 have remained strong and elevated compared with independent living and assisted living segments. Inventory for memory care segments in the Primary and Secondary Markets grew by 10.7%, from 143,826 units in the first quarter 2020 to 159,229 in the first quarter 2023, averaging 0.9% growth on a quarterly basis, while the inventory of both the independent living and assisted living segments have grown by 6.5% and 5.6%, respectively, over the same period, averaging 0.5% growth quarter-over-quarter (i.e., half that of memory care segments).

Demand Dynamics. Similarly, memory care segments in the 99 Primary and Secondary Markets experienced notable demand growth ahead of the pandemic. In fact, over the five-year period prior to the pandemic, occupied stock for memory care segments increased by 40.2% (from first quarter 2015 to first quarter 2020). This pace of demand growth far exceeded that of independent living segments (9.7%) and assisted living segments (12.8%) over that same five-year period.

During the peak of the pandemic, occupied stock across memory care segments in the 99 Primary and Secondary Markets fell by 6.8% as more than 8,000 units on net were placed back on the market from first quarter of 2020 to first quarter of 2021. On a relative scale and over the same period, this occupied stock decline was larger than across independent living segments (which fell by 5.1%) but not as large as across assisted living segments (which fell 9.8%). As background, the recently released COVID-19 study conducted by NORC at the University of Chicago, through a grant from NIC, showed that the average mortality rate was the least in independent living and comparable to its corresponding county’s mortality rate, while average mortality rate for assisted living was slightly higher but notably not as high as for memory care or nursing care.

Since then and after eight consecutive quarters (two years) of strong and relatively consistent demand momentum, occupied stock across memory care segments within the 99 Primary and Secondary markets has fully recovered after having increased by 17.2% from the pandemic lows; that’s equivalent to roughly 19,200 units that have been occupied over the period from the first quarter of 2021 to the first quarter of 2023. Remarkably, memory care was the first care segment that has exceeded pre-pandemic occupied stock levels and is now up 9.3% or 11,109 occupied units over its level during the first quarter of 2020. Comparatively, first quarter 2023 occupied stock for independent living and assisted living segments are 2.0% and 1.4% above their respective first quarter 2020 levels, equivalent to 7,701 and 5,256 occupied units, respectively.

Occupancy Rate Recovery. The occupancy rate for memory care segments within the 99 Primary and Secondary Markets recorded the second largest decline across senior housing segments and fell by 9.3 percentage points following the onset of the pandemic, from 83.1% in the first quarter of 2020 to 73.8% in the first quarter of 2021. Over this same period except for nursing care segments, the largest decline was recorded in the assisted living segments (down 10.5 percentage points to 75.1%), and the smallest decline was registered in independent living segments (down 6.6% to 83.4%).

From the lows in first quarter 2021, occupancy for memory care segments has been recovering relatively quickly and gained 8.2 percentage points to reach 82.0% in the first quarter of 2023. That places it only 1.1 percentage points below its pre-pandemic level of 83.1%. Occupancy for independent living and assisted living segments recovered 3.0 and 7.1 percentage points, respectively, from their pandemic-related lows, but both segments still have the most room to make up with a gap of 3.8 percentage points from the pre-pandemic level (90.0%) for independent living segments, and a gap of 3.4 percentage points from pre-pandemic level (85.6%) for assisted living segments.

Exhibit 1 – Memory Care Segments – Fundamentals

Memory Care Segments – Occupancy Recovery by Campus Type

In the first quarter of 2023, there were about 5,500 properties within the 99 combined NIC MAP Primary and Secondary Markets offering memory care services. Among these properties, 15% were freestanding – (i.e., offering memory care as the singular level of care), 74% were combined properties offering at least two types of service, except where independent living and nursing care are jointly offered, which comprised the remaining 11% that were continuing care retirement communities (CCRCs) offering at least independent living and nursing care and may include a full continuum of care including assisted living, memory care, and other supportive services to residents all on one campus. Across these 5,500 properties in the 99 Primary and Secondary Markets, approximately 85% are for-profit and 15% are not-for-profit properties.

As these statistics show, memory care is frequently offered in combined properties. Generally, these properties’ main concentration is the assisted living care segment, with a dedicated secured wing or floor for memory care. While the freestanding memory care model had seen a significant increase in inventory prior to 2020, this trend has since shifted. The freestanding memory care model has experienced a notable slowdown in development following the onset of the pandemic.

Exhibit 3 below shows that memory care segments within CCRCs had the highest occupancy (85.8%) in the first quarter of 2023, followed by memory care segments within freestanding and combined properties (82.2% and 81.5%, respectively). Freestanding memory care properties experienced the largest occupancy decline during the height of the pandemic, but in terms of occupancy improvements from pandemic-related lows, memory care segments within freestanding and combined properties have been recovering relatively fast, both within less than one percentage point of reaching first quarter 2020 levels.

Exhibit 2 – Memory Care Segments – Occupancy Recovery by Campus Type

Memory Care Segments – Occupancy Distribution “Same Store”

Exhibit 3 below examines the occupancy distribution for memory care segments using same-store methodology to include only those properties that have been open and reporting data at least since 1Q 2020 (4,770 properties in the 99 NIC MAP Primary and Secondary Markets). Newly opened properties and closed properties between 1Q 2020 and 1Q 2023 have been removed from the analysis. In other words, this methodology captures stabilized properties only.

In the first quarter of 2020, more than 50% of memory care segments in the Primary and Secondary markets had occupancy rates above 90%. At the worst of the pandemic, this figure fell to 29%, and as of today, it has increased to 45%. Further, 70% of properties had occupancy rates of 80% or higher in the pre-pandemic period, while 82% of properties had occupancy rates of 70% or higher during that time. However, during the peak of the pandemic in the first quarter of 2021, these figures experienced a notable decline.

Fast forward to the first quarter of 2023, the memory care segments of 70% of properties have achieved occupancy rates of 80% or higher, matching the pre-pandemic levels of the first quarter of 2020. Additionally, an impressive 84% of properties now have occupancy rates of 70% or higher for memory care, surpassing the share recorded in the first quarter of 2020 (82%).

To put it simply, there are nearly as many units of memory care within the segment categorization with occupancy rates above 90% as before the pandemic began, that is roughly half. This is also the case for units with 80% or higher occupancy rates, i.e., 70% of units. Conversely, there are 30% with an occupancy rate below 80%, the same as in the pre-pandemic period. At the worst of the COVID crisis, this had risen to 49%.

Exhibit 3 – Memory Care Segments – Occupancy Distribution “Same Store”

In conclusion, the dynamics and notable recovery of the memory care trends suggest strong fundamentals for the sector. However, understanding individual markets’ supply and demand trends, including labor supply and availability, is essential for senior housing stakeholders seeking to provide the best care and support for high acuity residents in memory care settings, optimize asset allocation, improve a portfolio’s performance, or for those who are planning a new memory care development project.

The data featured in this article is available at the market level. To learn more about NIC MAP Vision data and about accessing the data, schedule a meeting with a product expert.